Brokerages downgrade Cipla on slower growth prospects; stock slips

NEW DELHI: Global pharmaceutical manufacturing company Cipla slipped over 2 per cent in early trade on Thursday after the company reported a 25.5 per cent rise in quarterly profit on Wednesday, but slightly missed street estimates as taxes surged.

The company had posted a PAT of Rs 269.91 crore for the corresponding period of the previous fiscal. "Our long-serving chairman Y K Hamied will retire as managing director with effect from March 31, 2013, but will continue as our chairman," Cipla said in a filing to the BSE.

At 10:00 am, Cipla was trading 1.7 per cent lower at Rs 397.65. It has hit a low of Rs 393.90 and a high of Rs 400.05 today.

Morgan Stanley and CLSA downgraded their ratings on Cipla Ltd a day after the Indian drug maker reported a slower-than-expected rise in its October-December net profit.

Morgan Stanley slashed its rating to 'equal-weight' from 'overweight', citing slower growth prospects on the back of limited drug launches, margin pressure and a higher tax rate. The investment bank also cut its price target to Rs 414 from Rs 437 earlier.

CLSA cut its ratings on Cipla to 'underperform' from 'outperform', citing disappointing margins in the October-December quarter and expectations that its near-term earnings growth will be slower due a higher base.

The brokerage firm has also lowered EPS estimates by 4 per cent for FY14 & FY15. CLSA says although they see core margins improving with favourable currency and increasing utilization of Indore SEZ, near-term earnings growth would be slower due to a high base.

CLSA too cut its price target to Rs 415 from Rs 475 earlier.

HSBC has also downgraded the stock to 'neutral' from 'overweight', but raised its target price slightly to Rs 450 from Rs 440 earlier.

Other brokerage firms such UBS, BofA-ML and Jefferies maintain 'buy' rating on the stock with the target price of Rs 470, Rs 442 and Rs 460, respectively.